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Ashok Leyland Ltd
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Ladies and gentlemen, good day, and welcome to Q4 FY '20 Results Conference Call of Ashok Leyland hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raghunandhan NL from Emkay Global. Thank you, and over to you, sir.
Thank you, Nirav. Good morning, everyone. On behalf of Emkay Global, I welcome you all to Ashok Leyland quarterly results conference call. I'm very happy to introduce Ashok Leyland management team today. We have with us Mr. Vipin Sondhi, MD and CEO; Mr. Gopal Mahadevan, whole-time Director and CFO; and Mr. K.M. Balaji, VP, Corporate Finance. Thanks again to the management team for taking out time today. We will start the session with opening comments from the management, followed by Q&A. Over to you, sir.
Thank you very much. Dear friends, my apologies first for a slight delay as we were trying to get connected, but it gives me immense pleasure to welcome you to the Ashok Leyland FY '20 post-results conference call. And although Gopal and Balaji, my colleagues and I would have liked a face-to-face interaction with all of you, the current situation, as we all understand, requires us to interact through this virtual medium. We did interact earlier this month during the launch of AVTR, our new BS VI MBP platform. And I do thank you very much for participating in that interaction as well. Let me, in the beginning, quickly run you through the quarter 4 and full year performance. The FY '20 M&HCV TIV was sharply down, as you are aware, by 40%, owing to the general slowdown of the economy and also on account of change to the BS VI emission norms from the 1st of April 2020 and now as well because of the unanticipated effect of COVID-19 sometime in mid-March. Quarter 4 was impacted the most, with quarter 4 M&HCV TIV down to 48,604 vehicles, which was lower by 57% as compared to the same period last year, which was at 112,413 units. For the full year, Ashok Leyland's market share was 31.8%, vis-à-vis 33.8% in the previous year. While exports lagged, owing to the reduced demand in our core markets, but LCV was a great bright spot all through the year, where we continued to gain market share. The rising confidence of customers in LCVs augurs well for the future, especially with the soon-to-be-launched Phoenix project. For the full year, our revenues were at INR 17,467 crores as against INR 29,055 crores in the year gone by. Operating PBT was INR 518 crores. PAT for the year was INR 240 crores, and the full year EBITDA was at 6.7% in FY '20 versus 10.8% the previous year. Our closing operating working capital was negative at approximately INR 700 crores vis-à-vis a negative of approximately INR 400 crores in the previous year. Capital expenditure in FY '20 was at INR 1,227 crores. This is lower than the forecast given by us at the beginning of the year. Debt as on the 31st March '20 was at INR 2,005 crores versus a cash surplus of INR 715 crores the previous year. Gearing, at the same time, was 0.3x. With this brief, we are open to questions, and thank you very much for joining us once again.
[Operator Instructions] The first question is from the line of Kapil Singh from Nomura.
Congrats on a great set of numbers under very tough circumstances. So firstly, I wanted to check, we have seen a very good improvement in average realization per vehicle. And also, the gross margins have seen very good improvement on a quarter-on-quarter basis. Anything to call out what -- or some color as to why that has happened?
Gopal, would you like to take that and I'll add in, if necessary?
Hello?
Is Gopal there?
Can I take that question, sir? I think Gopal is...
Balaji, please go ahead.
Yes. Actually...
Yes, I'm there.
You're there?
Yes, good ahead.
Good ahead, Balaji.
If you look at -- there has been a significant shift in the mix, Kapil. Especially the higher tonnage vehicles, the number of vehicles which have been invoiced in Q4 is much higher than the Q3. There has been a 9% shift. Roughly, no, 1,000 vehicles have been shifted from the ICV and haulage to the higher tonnage segment, tippers, tractors and MAV. That is why you are seeing a sharp rise in the average realization per vehicle.
Okay. And on the gross margin?
Well, that is why what has happened is we have been able to get some good discounts also from suppliers at the year-end. That is why we're seeing the raw material costs not really getting impacted. And as Balaji had mentioned, we were able to get better realizations of this mix. See, one of the most important things about this performance also has been that we transited out of BS IV into BS VI with no inventory at all, either at the company's end or at the dealers' end. And so we were not in the pressure to sell, you see, so we wanted to ensure that we had the longer term larger purpose in mind, instead of trying to push inventory into the dealers, which is why we feel that the realizations were better. We also had a better handle on our raw material cost and the other costs as well, due to which we've seen the margins actually getting better.
Okay. And sir, secondly, I wanted to check on -- we have seen some intercorporate deposits roughly INR 500 crores. Where is that?
No, this is only to group companies. And actually, what happens is as on -- while our MD, Mr. Vipin Sondhi, had mentioned, the number of debt, which is correct, which is INR 2,000 crores approximately, that is the net debt. The gross debt was nearly about INR 1,100 crores more. And we had to have the -- we wanted to ensure that the surpluses are parked more effectively. So we had INR 1,000 crores and odd in bank deposits, and we had INR 500 crores being given to the group companies, which are individual group companies, there's no issue on the repayment. And we are getting a much better deal. So what happens is we will continue to do that till such time we have surpluses. As I'm speaking to you now, we have a surplus of nearly about INR 900 crores. This is the side of the intercorporate deposit that we place. So what happens is, we are able to astutely manage the returns between a bank deposit. Of course, the predominant part of it is in bank deposits or overnight mutual funds. What we also found is that with the turmoil in the market, it is better to have some steady-state return, which is why it has been done.
Right. Right. So there was no option to reduce the debt instead of...
We lost you, Kapil.
Sorry?
We lost you.
No, I'm saying is -- was there an option to instead of having these deposits reduce the debt?
No, you see the -- you see the debt has been taken as a measure of creating a -- this has been there in the past as well if you look at the annual report. We would have used that as a mechanism to provide liquidity to some of the group companies. But more importantly, it is not to provide liquidity to the group company. It's more to provide an avenue for parking our surplus. So what we are doing is when they require, instead of borrowing from a bank, if they require it, they borrow from Leyland and these are short term, and then they get replaced. And for us, what happens is it creates liquidity for Leyland. But what happens is you have sufficient money in your arsenal. You keep some in deposits with banks. You keep some with the group companies. And so you have the -- there is something called a gross debt and net debt which we hope you understand. So it is better to have a higher gross debt and a lower net debt and have the spread at liquidity, especially in COVID time. So that is treasury strategy that we are following.
Okay. And sir, lastly, can you comment on the financing business? What is the moratorium trend we are seeing for Hinduja Leyland Finance? And do you see any need for infusing liquidity over there?
At the moment, I think the Hinduja Leyland Finance is doing exceptionally well. And while the -- some of the customers have taken a moratorium, I think it is being done account-by-account and after getting into specific arrangements with them. We do not see any liquidity issues with Hinduja Leyland Finance at all. We have sufficient lines -- banking lines handy. And secondly, I would say that the operations are being tightly controlled. We have no significant issues to report at all in HFL. In fact, HFL is doing very well under the circumstances.
Is it possible to disclose the moratorium number? Like what percentage of book or customers have taken moratorium currently?
I don't have the number steadily, but it is not hugely significant necessarily.
Next question is from the line of Binay Singh of Morgan Stanley.
Just on the intercorporate deposits, which are the group companies that you have given this money to? And when do you expect repayment on that?
Let me put it this way. You see these intercorporate deposits are even treasury strategies for us, and these companies will be able to repay the money if we ask for at a suitable moment in time. These keep changing, but these companies are [ realizing that, we have SNPCL there, we have a shareholding of 13%. ] And then we have the next 3, 2 -- there are 2, 3 companies in this [ group ]. Like I mentioned to you, it is a win-win for both because what happens is the new place of deposits, we are getting an yield of nearly about 9.5%, 9.8%, sometimes 10.55%. In fact, earlier, it was -- we were getting yields of 10.55%. And when you have a surplus, you must understand, from February end, we started to consciously build reserves, right? And we wanted to build cash reserves. When you're building cash reserves what happens is if you borrow at something like, say, 7.5%, 8%, 8.25% and then you put it in banks deposits, which is at 4.3%, 4.4%, so you have a negative carry. So what we have done even in the past, whenever we have had surpluses, we have used the opportunity to park these money in intercorporate deposits, so that it will yield us better returns and help us to lower the cost of debt. And if necessary, whenever Ashok Leyland requires the money, these companies will ensure that they pay it back. And that is where we don't give it to any other outside parties. We give it only to Hinduja Group companies because we know that the money will come back as and when we require it. It's as simple as that.
Yes. Yes. So the key will be that these companies should also have the liquidity like in case ALL needs it urgently then they...
No, they have sufficient lines. You see what happens is, that is the advantage of being in a large group. What happens is, one, we are able to have a win-win for everyone. And for Leyland also it is benefiting because what happens is imagine, as on 31st of March, like I told you, we had over INR 1,000 crores of liquid cash, even though we had borrowed. So our gross borrowing were in the range of about INR 3,100 crores, INR 3,200 crores. So -- and then we had ICDs already placed. So the net -- actually, the disposable cash that we had was roughly about INR 1,100 crores plus another INR 500 crores, which is about INR 1,600 crores. Why do we have such an amount because when COVID is starting, it is important for us to have adequate reserves. And that is why we said that no, let us continue with these deposits. We had extended it. And instead of those companies going to a bank, they have borrowed from Ashok Leyland. And in the event Ashok Leyland requires money, they will borrow from a bank and repay it. So it's not as -- it's a very simple transaction. It's not anything more than that. So for us, it's a win-win. Both companies get to win on this.
Yes. So sir, anything on the sort of the credit rating of these companies because that will also be an important leg over here, right? Whether these companies are high credit rated or anything on the sort of the credit rating of...
I think what is important, I would say, in fact, you see these companies, what is important for these companies is they are part of the group. So that is the most important thing for us because then we know that we are absolutely sure about the money coming back. And these companies have adequate lines necessary to repay it, either there will be lines from the banks or some other lines. So we -- for us the comfort that we derive when we give this ICD purely because it is part of the Hinduja Group. And this is nothing new, please understand. We have given ICDs in the past. It has been disclosed in the annual report. The whole thing is done very transparently. And this is not something that we have done only in the month of March. But it is useful, especially in the current scenario, when Ashok Leyland is actually trying to mop up further funds. So when you want to have funds, like today, even though I have -- I'm giving approximate numbers because these are in the middle of the quarter. But I have approximately about INR 1,000 crores. But even having said that, I have gone for an NCD. Why? Because we anticipate that in the event that is something, suppose, you see that the COVID situation is so uncertain that we need to have adequate liquidity to manage a company as large as Leyland. So when you do that, the best thing to do is to draw on our lines and create long-term borrowing lines so that we can sail through this current crisis efficiently. And when you do that, what you do, as an efficient treasury manager, you want to look at the following things: safety, liquidity and returns. So when I put it in bank deposits, what I look at is safety, then I have to look at liquidity and then returns. So we put it only into banks which we are very clear about, and we also have working relationship with. When you go to the Hinduja Group and when you're actually putting the ICDs there, I think all 3 parameters are kind of ticked off because in a bank deposit, the returns are very low. But when you give it to an ICD, then what happens is you have both the safety of the group, the liquidity, whenever you want it, you can get it back, and the returns are also acceptable because this is at a much higher rate than our borrowing rate. So for example, one of the CPs -- for example, when I borrow a CP today, it's significantly low rate. I can't even disclose some of the rates that we're getting it on. And when I'm able to flip it in an ICD, say, for 9.5%, 10.5%, right, depending on the month in which we place it, I'm getting a clear arbitrage of 3% to 4%, which is extremely useful for a company like Leyland at current times because the negative carry is reduced. At the same time, you must remember, we are not putting all the things there because we want to ensure that we have a proper allocation of funding, which is why only a portion of the liquid funds are being placed into deposits. I -- frankly, there are nothing -- there is nothing more to this than efficient treasury management [indiscernible]
Yes. And sir, do you see this trend sort of going further? Like as you're raising more NCDs, the intercorporate deposits will also rise?
I don't believe so. I don't believe so, unless I suppose end up having a INR 2,000 crore surplus, which I don't believe I will have, then we will look at it. But I don't think we're going to do that. See, this is a good mix to have. Like, for example, even my own deposits, if you look at it, I will have it on 1 month deposit. Then I will have it in a bank, which is -- I'll put it on 1 year deposit, where they will say prepayment is allowed. But then I will also have possibly 6-month deposits where no prepayment is allowed, but I'll get a slightly higher interest rate. So there is, see, beyond a point, what you try to do is to ensure that, first of all, your entire portfolio is -- the safety -- completely tied up. Then you look at liquidity from the banking sector, put it in 3-month deposit, 6-month deposit, maybe 1-year deposit, depending on the forecast that happens. Then when you look at it from liquidity aspect, the group companies when we place it, we can take it on call, give them a notice of 10 days or 12 days, and we are able to get the money back. And then the third one is the returns. So if I put it on a longer tenure in a bank, I get a higher return. If I put it on a shorter tenure in a bank, I'll get a lower return. But in the case of an ICD, what happens is I get 3% to 4% higher, at least 3% minimum higher than what I'm borrowing at. That means that part of the borrowal of INR 500 crores doesn't have a negative carry. It actually that carry -- that positive return is actually used for my overall treasury bucket. This is how we have looked at this entire -- what should we say, the entire portfolio.
Overall, I think the key is risk-adjusted return. But sir, second question on the -- what is your breakeven capacity utilization rate now?
Yes. I think when you are actually in a COVID situation where the sales is quite insignificant, it would be virtually impossible to do a breakeven analysis and tell you this is the number. All we can tell you is the following. In 2019/'20, we have seen the results. It has been a tremendous effort that has been done by the team, both under the leadership of Mr. Hinduja when he was actually leading the company for predominant part of the year and after that, Mr. Vipin Sondhi. And I think what we did was something which was good in the medium term. We ensured, first of all, 0 inventory as we carry forward into the new year. We ensured that we reduced our overheads quite significantly. Our project cases before too resulted in nearly INR 500 crores -- INR 540 crores of savings in all types of overheads, including production savings and administrative overheads. The run rate of our administrative overheads has come down partly.We had to do -- unfortunately, we had to also do a VRS, which is part of the overall scheme of things. We did that quite well in advance, I guess, you must remember that. This was not something that was being looked at as separate, but we continued to work on our efficiencies. So rest assured that as we move into the new year, yes, these are challenging times. But for us, what is important is, what is the -- what are the things that we can do better? Why waste the crisis? So we are looking at this whole thing in a completely different way. We're looking at what we need to do on ultra short-term strategy, what we need to do on short term, what we need to do on the medium term. And we are also looking at how do we improve the efficiency, effectiveness of the company. We are looking at each and every process in the company, each and every cost in the company, improving productivity. So there's a lot of work that is currently being done and believe me, once this COVID situation is over, we believe that on people, products and productivity, we would come out much, much better. And we have launched some of the best products as well, and we are confident about the launch of, as our MD had mentioned about, Phoenix. So I think there's a lot of capability building that is getting done in the current situation. MD, would you want to add something?
Yes. Gopal, thank you. And actually, you've described it very well. May I add to that, that whatever we do, it will be frugal. It is disciplined and is to ensure that we become stronger and stronger during this period. And just to add in terms of the new products, the AVTR is receiving a good traction. And of course, LCVs, we will be back to you and discuss it more in -- this thing in detail when we are ready with the launch of the Phoenix in the latter quarter. So we are ready on all fronts as the market gradually opens up.
Next question is from the line of Ateet Bansal from Nippon India Mutual Fund.
Sir, a couple of questions from my side. We have an impairment of odd INR 100 crores in FY '20. This is pertaining to which entity?
There are 2 things that -- that impairment is on account of Optare. See, what we are doing is, again, just want to clarify certain things very quickly. We have conservatively over these past few years, if you notice, we have been taking impairments even in good times. So we had impaired the investment in Optare completely, I think, 2 years ago, and we had impaired 50% of the investment in Albonair. So as we continue to invest in Optare, this requires a secured financial support, whatever investments are done, we take an interest. Now Optare as a company has got a lot of potential as well. It's a good company, great products, going through challenges because of 2 reasons: one is because even before COVID, we had the Brexit, it is based out London, and we had seen the demand coming off in that as well. After that, we had Brexit. But let me tell you, here again, just like Ashok Leyland, Optare has got some very great products. It's moving -- it's shifting its entire focus on to electric, and it has successfully won the bid for the U.K. double-decker series, first. Secondly, we had an EV order, which is of nearly about 100 to 110 buses in Dubai, which is, again, a very, very sophisticated market. These are extremely sophisticated buses. We had successfully delivered year before last, again a very large order to New Zealand. So for us, what we are trying to do is to actually change the product profile of this company. And we have put in some of the best people of Leyland inside the company. And there is a very clear focus that this company is having to see how do we get that to a breakeven and move forward. We are -- actually, we will, at some point in time, see some clawback of Optare technology coming into India as well when our roads are ready for those ultra-low buses. And EV is the technology of the future. Back to you.
Yes. Can I add Gopal...
Yes, please. Please.
No, I think you've summed it very well. I think the important thing is the technology that Optare has is the technology that there's lots of value in that technology, and it is the future as well. Then it is a matter of also Gopal mentioned, we've put some of our best people there. The important thing is how do we ensure that costs are done or managed in a way that this turns into a breakeven. So it's technology and the rest is about operational strategy, which we've put our best people there.
And the other question I have is what was the gross debt as on our current debt after this NCD raise of INR 200 crores?
Well, the gross debt as on date would be about INR 5,400 crores. So I'll give you the exact number. And we will have about INR 1,000 crores, INR 1,200 crores of [indiscernible]. I'll take it off-line and give you the number. I don't have the number with me currently.
Sure.
Next question is from the line of Nitin Arora from Axis Mutual Fund.
Gopal, just want your view now on the state ordering from a buses' side. So what we are witnessing because of the situation, state transport is really in a flux. What's your sense because these are the orders which were saving us at least from a fixed cost handle, what we were getting the orders in the last 5, 8 months through pre this COVID? And second, on the demand on the M&HCV side, though we were expecting the pent-up last year, but even that didn't happen and then this COVID came. And then FY '22/'23, where the DFC actually starts aligning with the country. Do you think the replacement cycle itself will be very challenging for the CV industry, at least for 1 to 1.5 years perspective? Just maybe outlook on that.
What I will do is I'll direct this question to our MD and then after that supplement, if any additional information is required. Vipin, would you want to take this?
Yes, sure. Sure. The important thing here is -- it's a great question. I missed the first part on buses. So I'll address the second part and then try and understand the first one. As far as M&HCV is concerned, they have their own -- within that, you have your own trajectories. The trajectory of, let's say, tippers and infrastructure does tend to move on. There is investment coming back. And therefore, tippers is already showing an interesting possibility. So while it will take some amount of time, but we are about moving goods. And as long as goods continue to move, this pent-up, especially in the last 60 to 90 days, there will be, in our view, by -- I think by the next quarter, we will start seeing some movement, but certainly by quarter 3, much more movement. And I think every quarter is going to be better than the other. And within M&HCV, each one of the subsegments will have their own trajectory. What is important for us is to ensure that we have the right product range. And I think with modularity, which we call the AVTR, this essentially puts the customer in a phenomenal position because now with -- depending on the application that the customer uses his vehicle for, he can have multiple options of whether it's loading spans, cabins, suspensions or drivetrains. We expect this to be a great driver for us. The second thing, which is extremely important is the total cost of operation, the TCO, and within that, the fluid consumption. And why we are saying fluid is a combination of AdBlue as well as diesel. And we believe, based on tests, that ALL will have the best TCO. So within the market, as it grows, we feel that we will be increasingly preferred by the customer. Your first question, and please correct me, related to, I think, state transport undertakings and the purchase of buses. Is that correct?
That's right.
Right.
Yes. Definitely, I think state transport undertakings did buy buses in the previous year. One of the suggestions by the bodies and -- to the government and by Ashok Leyland as well is as public transportation, which may initially have some amount of hesitation because of the health situation, but public transportation is public transportation. And therefore, it is what our suggestion has been that state transport undertakings be encouraged to buy more buses so that the initial hesitation may also, let's say, be removed because, for sure, for moving the same number of people, more buses will be required. Where Ashok Leyland is coming in, we are, as we speak, launching a series of buses with common styling with a common Ashok Leyland look and with a significant amount of standardization. In fact, you'll see buses which are BS VI-enabled and will all have a common styling and look. Internally, we can redesign it based on what is required in the current times. So maybe after an initial period, I think the bus market will also start opening up. Gopal, please go ahead.
No, I think we have said it, Vipin. I think that's our strategy at management [indiscernible].
\Sir, just one more, if I can squeeze in. If you can talk about the CapEx and the investments for this year, and especially the investments of core versus with our lending strategy to companies being whatever the cycle we are in. And also, if you can talk about the percentage increase in BS VI vehicles, has that been passed on? Those are the 2 questions.
I will just tackle one, and then hand over the CapEx to our MD because they can specifically answer the question. There is no lending strategy [indiscernible]. I just want to make that very clear. We don't [indiscernible], there is no lending strategy. What we are doing is we're [indiscernible] our services, as I mentioned earlier, in a very judicious way, so that we look at the liquidity and get more returns from the overall [indiscernible]. That's about it. And we, I believe that -- we all believe that in terms of comfort that we have with these companies is high, we have no issues at all in terms of getting the [indiscernible]. And now I'll hand it over to the MD for discussing on the CapEx and investment strategy [indiscernible].
Let me -- thanks, Gopal. Thank you. Let me start with the fact that we -- whatever we do, we do it in a very measured and frugal manner. We are coming off a fairly large CapEx cycle because of the introduction of the BS VI and AVTR, the MBP platform. The Phoenix is, well, for all practical purposes, also ready. So in a sense, our CapEx -- major CapEx cycle is behind us, what we will be doing as we move forward this year and next year is to ensure that the maintenance Capex, which is significantly lower, will obviously remain in position. And any strategic issues for CapEx is concerned, we will thoughtfully consider and bring that forward. But the major CapEx cycle for the immediate is over.
And as far as the investments are concerned, we will require -- [ will require ] and so forth. So we will continue to do that because I think we are getting to that point where we have got very good products in hand. And we are, at this point in time, globally, when I say globally, I'm talking about the financial position, the solution of corporate. I believe that we are almost [ waiting ] to close to the bottom. While there is a lot of [indiscernible]. I'm sure that things will pan out. And in a year's time, we will mix -- mankind would have met one more challenge that was -- had reported. And there would be times when the will get back to doing what they are doing. And we have to be ready doing these things in a different way. And offer -- also one such company, which has got a good portfolio of products. And we'll see -- we are confident that with the efforts that we're putting into the company, [ it will see it grow ]. But let's wait and watch.
Next question is from the line of [indiscernible] from [indiscernible].
Gopal, one question to you. I think I missed the gross debt number. If I heard it correctly, you were saying net debt is INR 2,005 crores and gross debt is INR 5,400 crores.
No, no, no. That's why -- let me clarify. Thank you for asking this because somebody asked the gross debt as on today, which is 26 of June after our recent NCD. Now the gross debt as on the beginning of the -- as on 1st of April or 31st of March was about INR 3,100 crores. And the net debt was INR 2,005 crores. So we had approximately INR 1,000 crores of surplus, which has been placed as deposit. And over and above this, we had another INR 500 crores which is there in [ IT ]. So we have sufficiently buffered when we walked into a grim COVID-bound new year or financial year because we are confident that we had sufficient liquidity with us. Today, as I talk to you, I'll have to give you the number because I think our treasury guys are pulling it and I don't want to [indiscernible]. So I'm going to give some approximate number. After the recent NCD issue that we have done, we should be at about INR 5,200 crores to INR 5,300 crores profit, but that ladies and gentlemen is today, not on 31st of March. I repeat, that is today. And the net debt would be in the range of about INR 4,000 crores. So we are comfortably positioned. Our debt to equity is still at about -- if I look at it on a net debt basis, and [ prior ] even the ICDs, because that is liquid money. It is not illiquid money, it is liquid money. So if I were to remove that, also our debt to equity would be somewhere in the range of 0.45 to 0.5, which is very comfortable on a [indiscernible] basis.
So I'm just understanding the difference between the net debt number of -- I mean at the beginning and the end of the quarter, it looks like your cash burn plus CapEx -- I mean CapEx, I understand, would be negligibly around INR 1,000 crores. Is my understanding correct?
[indiscernible]
Sir, if I take the difference between the net debt at the beginning and the closing quarter...
Of course. Of course. We have the cash, it is not cash burn. We must understand that we have creditors to pay and we have to pay them, right? So that is not a cash burn. Cash burn, let me clarify, is what you [ input ] as running expenditure. This is working capital, right? So we had a negative working capital as on 31st of March, which means we had creditors to pay. We had INR 2,900 crores of creditors to pay. And we had some good terms with them. As well as we -- in some cases, the last [indiscernible] we said, let us walk together on this. So we have been paying off creditors very significantly. So that's a significant amount. And -- but as the production starts, what will happen is there are 2 that you must remember. This is not a normal operating cycle. We have -- in the last 3 months, we have the situation where we don't have any revenues. Of course, we started it quite early in May where we did sell some vehicles. But what I'm saying is there is no normalized revenues coming. So what do we have to do? We have to reach the borrowings to pay off our creditors, and we have to pay off expenditure. But the major payment that has gone is predominantly in paying off our creditors. And that is what has -- that is the reason we're seeing the net debt numbers going up. But as the business starts to pick up, we're going to get into the operating cycle. And more importantly, we must understand that while we are paying off our creditors, some of the state transport undertaking some government businesses and also export realized deals, while they are all under [ NCD ] and stuff like that, we will get the realization only in the coming months. And all of them are very reasonably well placed to make the [ change ]. But these collections have also got delayed because of the conflicting factors, most importantly COVID. So once that happens -- see, at the moment, these are all estimates. I can't give forward-looking statements. I want to repeat that. But what we are estimating is that we will be able to realize the [ receipt of these ] over the next maybe 50 to 90 days, we will -- then as -- once the operating cycle starts and we will see the money flowing into the company. And then that will be used for the -- basically we'll have a build of [indiscernible] materials. And then once the normal operating cycle starts to come in, you will actually see that the debt will start to get normalized and possibly go outwards. But let it happen and we'll be happy to [ tell you about it ].
Okay. And just 2 last questions from my side. If you can give an approximate range of cash burn per month when the plants were closed? And in Q1 -- I mean, we are almost at the end of Q1, have you given any incremental intercorporate deposits to the group company? Just these 2 questions from my side.
We have not given any incremental intercorporate deposit. The intercorporate deposit I think are [indiscernible] a little bit earlier to INR 500 crores, not more. I hope that is clear. No incremental intercorporate deposit. The second one is the cash burn, it's predominantly the [indiscernible] and then certain overheads. And we must understand, we are spending money and spending it wisely. And I'm going to hand it to the MD the [ to tell you the ] initiatives that we are driving in the Phase 2 of the group. So there are -- we are ensuring not only the safety of ourselves, we are also ensuring the safety of our channel. We have to ensure that we make those necessary investments. And we are also supporting the [indiscernible]. So there is some expenditure, which is also spent on that. But essentially, the platform is not very significant. It would be in the range of about INR 150 crores to INR 170 crores a month. But I think we are very careful about the way the money is being spent and I would compliment the entire leadership and team of Ashok Leyland. But MD, for your perspective.
Thank you, Gopal. I think number one -- and during this lockdown period for us, number one was to ensure the health of all our employees, but also of the community around us. And we engaged very closely with both the government authorities and the communities around to make sure that, that was adequately addressed. The second immediately was to constitute teams to ensure that there was no money that we were spending, which was not required during that period, except on health protocols and safety protocols. Now there are teams, and Gopal is leading, like he did the K54 efforts, something called a reset effort, which is looking at every opportunity to enhance revenues and be ready for it, to control costs and do whatever is required. So we are absolutely ready as the markets open up to run operations, run our sales, run our products in a very, very optimal manner.
Next question is from the line of [ Bhaskar ] from ASK Investment Managers.
My question is on the e commerce segment. As we understand, there's a lot of movement that is happening and a lot of pent-up demand on that side. So how are these position on that part of the market in terms of our products, our engagement with those fleet operators who are out there in that segment? If you could give us some color on that part of the market would be helpful.
MD, would you want to take it?
Yes. Happy to do that, Gopal, and please feel free to add. I think it's an interesting question because not only was e-commerce important pre-COVID, it becomes even more important as we sit in our homes, then goods have to find their way to our homes because earlier we were going to the market to buy them. We are very well positioned with, as you know, our LCV segments, specifically the Dost. Inquiries, I must say, are in good measure, let's say, have already started coming in. We are rolling out vehicles in our LCV platform. Our engagement in LCVs, as you see and you would know very well, is more and more on the retail side, and we are distributed very well with a very efficient dealer network through which these inquiries are coming in. Going forward, as I mentioned, in the next quarter, we'll further launch another LCV product right now on the code name of the Phoenix, which will further strengthen our position in the LCV arena. So e-commerce is a lot about the smaller vehicles, but we are very well networked on the retail side, especially. As far as fleet owners are concerned, it's normally the larger -- the trucks which is the MHCV. But whatever we have, we do it with the fleet owners that we have known over decades. So very strongly placed and going to be even stronger going in another quarter.
All right. Right. And just to understand, what will be your market share in the ICD segment? Because I understand that the ICD segment was largely on the fleet operators' side with the e-commerce player.
I'm not sure I have individual shares available. I'm not sure Gopal or Balaji have as well in terms of individual. We can have that sent. Gopal?
Yes. Well, we are at about -- see, we have actually methodically don't [indiscernible]. We have methodically grown our presence in the ICV segment over the last 2, 3, 4 years. This has been the strategy of the company, as I used to call it as a slotting. We keep on adding slots into our product portfolio. And we are today at about -- nearly about 22% -- 21% to 22% in the -- range is, say, 20% to 22% is in the ICV segment, which has been pretty healthier than the year past. Because you must remember, Ashok Leyland started as a heavy MDV, the heavy-duty trucks. Then we moved to ICV. And simultaneously, we have also done a very good job in our LCV business, where again, the market shares are hovering at about 18%. We [indiscernible] 14% to 18%. So the strategy of the company is to retain the leadership through innovative products in MDV and enhance it. The second one is to grow our market share in the ICV business and grow our market share in our LCV business, not only by just pure organic growth, but also to ensure that the addressable market in which we are playing is higher in LCV. By the way, one final information that we wanted to say is we are truly well positioned in ICV because we have the largest number of offerings and variants in the ICV segment today.
Next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Service.
Congrats on the [ reasonable ] numbers in this kind of environment. A couple of questions on the LCV launch. So any timelines that you share? And secondly, considering that will be in -- we want to be about 2.5 ton segment. The addressable market beyond those is relatively small, so what gives you confidence of doubling your addressable market? Can you throw light on that?
Well, what was your first question? Sorry, what was your first question, Jinesh? And then I'm handing it over to MD.
So timing of LCV launch for project Phoenix and...
Okay. That's fine. Sorry. Please go ahead MD. Sorry, sorry.
Yes. I won't give you a precise day or date, if that's okay, because we want to make sure of the time properly. But within the next 3 months. The model itself is ready. It's just that because of the current situation that we've decided to change the timing itself. So within the next quarter.
Okay. And what gives the confidence of doubling your addressable market considering that the incremental product launches will be above those? That market itself is relatively small, so just trying to understand your perspective from that.
Yes, 2 things, I think. And that's -- it's a great question that you asked. One is the moment you add one more product in your portfolio or 2 more products in the portfolio that's already there, it gives the dealer a whole new strength to expand in the existing base as well. So the dose itself is performing very well and gaining market share. For example, Gopal mentioned to you from 14% to 18%, and that's going to go up further. But this will bring a synergy across the LCV platform and range. And that's what gives us the confidence. We're already growing with what we have, that will just further multiply the way we will address the market.
Got it. And lastly, can you throw some light on the cost-cutting targets for FY '20? We saved more than INR 500 crore. FY '21, would you be able to share the targets?
I think what we are going through -- and Gopal is leading this program, and we're not sharing any numbers if that is all right with you. Right now, we are in the moment of ensuring that we have a pan-company program which is -- which involves all of us, every individual, and each one of us has a plan going forward. We will put these plans together and address them at a suitable time. But be rest assured that every aspect of revenue, cost and CapEx is being looked at with a fine-tooth comb. So that it's not only about cost, but it's also about revenue enhancement and opportunities thereof.
Sure. Sorry. And then last question to Gopal. We have seen sharp reduction in other expenses. That's a more sustainable number? Or are there any one-offs there?
No, there are no one-offs. These are -- what we are trying to do is to take the costs out, and we hope to sustain that into the new year as well. And that's what we've been mentioned in [indiscernible]. And let's see. I think you saw that [indiscernible] the numbers further down. There's a lot of work that's going on, to be honest. A lot of work.
Next question is from the line of Pramod Amthe from CGS-CIMB.
This is with regard to the industry and Ashok exactly. Considering the new MD has taken up, sir, how do you look at industry phenomenon of 20% discounts as compared to where we used to be in the construction space, which was really robust? And what is the -- your leadership would look at Ashok to be a leader in this industry?
Sorry. There are 2 questions. Could you just repeat them one, and then I'll respond and then I'll respond to the second one as well. Sorry, the audio went off.
Sure. Okay. So basically, what I'm saying is you have come from the construction equipment space, which is much [ MDR ] and of different behavior as compared to CV or [ something ] needs to be precise, which work with increased discounts as 20%. So how do you see this phenomena at an industry player as you have the second-largest player? And will the Ashok behavior change under your leadership on this discounting phenomenon?
That's a great question. One, Ashok Leyland has a tremendous heritage, as you know, it's a 70-year-old company with great employees, great heritage, with shareholders and all of that. So what, as a Managing Director, I can only do and work with an already excellent team, which is in position. But when you talk of specific discounting, and I think as an industry, we have to be more and more responsible. Now we, on our own, what we plan to do -- perhaps, okay, I might rephrase that, but perhaps there were, let's say, industry-wide discounting and Ashok Leyland did not participate in a big way. We chose to actually walk away at many, many times during the last 6 months or so from deals. But maybe it was to do with excessive stocks that some companies were carrying. Going forward, with the AVTR launch, we are focused on value selling. And value selling in terms of modularity, the advantage that it gives to the customer in designing his or own product, back costs will come down because there are fewer components, and therefore, the supply chain becomes more efficient. And then they can make to order. We actually will have a sales configurator through which the customer can actually configure his or her vehicle. We will focus on selling value to the customer, and we also believe, as I mentioned, that we have the best total cost of ownership. The -- that's our belief, total cost of ownership. And within that, the best fluid economy, which is the combination of diesel fuel combination as well as AdBlue. I think we offer the best. So we will sell value as much as possible.
And would the focus still be on market share? Because that's one of the key reasons why the discounts [ rampant ]...[Technical Difficulty]
Sorry, can you hear me?
Yes.
There's -- okay. So back to you. Market share is always important. The question is, we would not buy market share. We would earn market share. Earn through the people in the field, through the product and through service. And that's how we will be looking at gaining market share, importantly, at the retail level, the retail market share. Hello?
Sir, the line for the participant dropped.
Yes. Are we still on?
Yes. We are on, right?
Yes, sir. Next question is from the line of Ashwani Kumar from Nippon India Mutual Fund.
My question to Mr. Sondhi. I just wanted to understand what is your thought process on exports? And what is the company doing to further move up the quality curve and specs so that you can address that market? And second, what opportunities do you see in participation in the defense-related products indirectly through the trucks in coming years?
We -- it's a great question. So let me answer the second question first. Because defense is also a matter of pride, that's a matter of participation at the borders, et cetera. We have been, I think, the longest and the largest logistical supplier to the defense through the Stallion. We continue to supply VFJ kits, which have been reinitiated, and this is a steady stream of business. We also now are looking at -- there are opportunities opening up on retrofitting, and there are opportunities opening up on spares. And we will definitely look at this very -- some we are already participating in, but we will definitely look at it very carefully. We have a separate defense vertical, which is headed -- which reports in to the chief -- one of my colleagues, who is the Chief Operating Officer. So defense remains an important portfolio. Coming to exports, if you look at our vision, Ashwani, the vision is to be a top 10 global CV player. That vision cannot be accomplished unless we spread out into geographies which are outside of India as well. So the first step -- and we've already taken these first steps, you're aware that we have a plant in the Middle East. We have initiatives in both Middle East and Africa. We will continue to spread our wings and give a thrust. Now how are we doing it? We are doing it to the fact, first, you need both left-hand drive and right-hand drive. So the Phoenix, which will be launched, will have both options. So that opens up new markets. The AVTR is, let's say, protected by design to do both. So that's something that we can initiate as well. So we've kept that option open as well. And finally, we are strengthening our dealership positions in the geographies that are naturally inclined to the Indian market, which I mentioned, which is Middle East, Africa and, of course, the SAARC region, and we are very strong in the SAARC region. And we opened up conversations even during this period because borders are shut largely. But we are in conversation with all our major stakeholders in each one of these countries on a virtual platform.
And sir, in exports, can you increase market share in MENA region? I mean do you think there is opportunity for you to scale up with new products and -- I mean, more entry into the lighter vehicles and higher market share in the buses and the truck segment there?
So the answer is just -- which -- did you say which region? Sorry, I missed that one.
MENA. MENA. Middle East and North Africa.
Okay. So the Middle East, of course, we have a bus-making facility. North Africa is interesting because a lot of North Africa is French-speaking Africa. So the -- we are, for example, we are in touch with some of our stakeholders in the Ivory Coast, which is a little northwest, if I might think correctly. So the opportunities exist. And we -- this will be, let's say, a major thrust area for us over the next 5 years. So I wouldn't talk about a 1-year plan, but a 5-year initiative.
Next question is from the line of Priya Ranjan from Antique Limited.
One is on the discontinuation of the last question. Predominantly you have been strong in the staff movement of the Middle East region. So -- which is actually a lot of people are coming back to India and all. And then the oil prices are not so great. So how do you see that your core market and Middle East is going to remain like that? Or is there a risk that your core market, which you were trying [ to test ] has actually -- will actually shrink over a period of time? And if that is there, then how do we address that in the Middle East?
Yes. No, it's a good question. I think you're also very perceptive in the way you asked that question as well. We are stepping up through the launch of our BS VI and other capability in terms of buses, in terms of styling, et cetera, to ensure that we move up the value ladder in the Middle East and not be confined to the particular market that you're speaking about. So buses is a thrust area for us. And buses in, let's say, more sophisticated market like the Middle East is another trust area for us. So we're really stepping up the value chain as far as buses are concerned in those markets so that we don't remain in any particular segment.
And sir, in terms of domestically also, when we have looked at the different segment of market share, I mean, typically, your market share has been slightly lower in the tipper side. So as you speak, that probably the tipper is one segment where your market shares -- your -- the market is expected to recover faster. And even the ICV, because of the -- again, the e-commerce, et cetera, ICV segment is also going to be slightly higher. Even in that segment, your market share is slightly lower compared to overall market. I mean, overall [indiscernible] side. So how do we read your market share trend? Can we think that your market share, because of the market mix moving in, say, next 1 year, the market share will be slightly weaker?
I don't think so. And I don't think that with the AVTR platform, actually is just the reverse. With the AVTR platform, we've converted 3 platforms to 1 platform. And I think we'll come out much stronger even in tippers and ICVs and we actually gain market share. So I think we should -- we are confident that we will continue to enhance our focus on both ICV and tippers. Long-haul will always remain core. But we hope and expect to gain market share. And that's how we're getting ready with -- along with our dealerships, customers, engagement with fleet owners, operators, those in the construction industry, many of whom we know. So in that sense, I think we are looking it as an opportunity with the AVTR platform.
And in terms of, say, I mean, what -- can you just elaborate -- I mean, Gopal can -- if you can answer, how much was the truck and buses revenue in this quarter? And how much is spare parts, et cetera, and the defense in this quarter?
Priya Ranjan, I will give you all the details, Priya Ranjan.
Gopal, we've got the other engagement as well, yes?
Yes. Can we wind up?
That was the last question for today. I will now hand the conference over to the management for closing comments.
Okay. First, Gopal, and then I'll go. Hello?Okay. Sorry, Gopal, are you there?
I'm sorry, the [ line was stopped ]. Thank you very much, everyone. Thank you very much for the interest in Ashok Leyland and taking time off from such challenging circumstances, I believe, and a very healthy participation. Thank you MK as well. MD, for the last few words.
Thank you very much, and thank you Gopal, Balaji, my colleagues. And thank you very much to the entire investor community for your interest and be rest assured that we are doing everything that is required in terms of products, in terms of people, in terms of costs and in terms of revenues, looking at all opportunities. And we've got some really positive things to speak about and go into the market very strongly. Thank you, and we look forward to remaining engaged.
Thank you.
Thank you.
Thank you, everyone. On behalf of Emkay Global Financial Service limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.